Thursday, November 10, 2016

Some Thoughts on the Election

The election of Donald Trump has been a long time in the making. Since the oil embargo in 1973, there have been tremendous stresses placed on the U.S. economy. First, it was dependence on domestically produced petroleum to fuel our economy. This quickly morphed into an inflationary spiral. The inflation pressure destroyed or greatly pared down mature manufacturing industries such as steel and the domestic auto industry. While this was occurring, Ronald Reagan brought anti-union politics to the forefront in the Republican Party. Throughout the 80s and early 90s, the U.S. economy was guided away from manufacturing and toward finance. Bill Clinton came in and leveraged what remained of union political strength, along with changing demographics to get elected. When he finished the push to enact NAFTA, he made it a bipartisan coalition to undermine the manufacturing economy. Meanwhile, the U.S. economy was supported by massive borrowing in all sectors, corporate, personal and government. This debt-fueled economy, which continued to shed manufacturing jobs and was governed by a bipartisan coalition that promoted income inequality, hurt manufacturing employment and cut taxes on the wealthy, came crashing down at the end of the Bush presidency. Obama decided to try to address this with a Republican-based health insurance subsidy plan, new regulations on finance, mild tax increases on the wealthy, and otherwise trying to hew to the bipartisan consensus that had held since the time of Reagan.

Republicans have cynically played on the decline of the white middle class by claiming that environmental regulations and taxes have wrecked the economy while poor people, mainly minorities, have supposedly benefited. They have conveniently overlooked 100 years of Republican support for free trade and opposition to organized labor. Meanwhile, Democrats have joined with Republicans to overhaul the tax code to the benefit of the wealthy and abandoned the working class while claiming that only the Republicans favor the rich. Donald Trump sensed an opportunity to roll up deep ambivalence toward minorities and outright racism amongst white Americans while positioning himself as anti-free trade and pro-manufacturing. It is an interesting, if massively cynical, position to take. It has played on a rural-urban divide that has grown under the bipartisan coalition that saw manufacturing decline while national demographics have shifted. The challenge for Trump is that he will be working with a legislature that is solidly aligned with the Republican party's free trade, anti-labor, anti-tax dogma. Trump appears to be trying to play to racial animosity while also playing to struggling blue-collar workers and anti-government sentiment, while also repealing the modest reforms to a failing health insurance system which Obama undertook.

Trump's play has highlighted a number of contradictions in our existing political coalitions. Democrats have increasingly grabbed support from the professional classes in U.S. cities by supporting diversity and secularism, pushing for a strong central government and mouthing support for the working class and unions while doing nothing for them. Republicans have built a coalition based on white racial resentment, wrapping themselves in religion, championing free trade and tax cuts , attacking government and regulations and destroying unions. Trump has tried to combine the anti-government policies of the Republican party with the anti-business positions mouthed by Democrats but completely abandoned by the bipartisan coalition, but tied them together with a more vocal racial resentment.

Looking back at the 2016 campaign from the beginning, it appears that the most logical political movement for the times, in a perfect world, would have been Bernie Sanders' campaign. Sanders combined all of the the economic ideas antithetical to the bipartisan coalition that has reigned for 40 years and led to the hollowing out of the middle class and also fought against the racial resentment of whites toward an increasing diverse population. Trump, on the other hand grabbed at anti-trade policies while also clinging to the failed tax cut and anti-regulatory and anti-climate change policies of the Republican party, while turning up the racial resentment to 11. Clinton and the power brokers in the GOP tried to cling to the bipartisan consensus.

Trump is the result of the elites in both parties dividing the lower 80% of the population and giving the gains to the top 20%. The urban portion of the 20% overwhelmingly supports the Democrats, while the rural portion supports Republicans. Meanwhile, the urban and rural portions of the 80% are also split between the parties. I don't see how this division will allow our economic problems to be effectively addressed. It appears more likely that racial and rural/urban divisions will be made worse, and the illogical combination of policies Trump has supported will lead to further income inequality and unrest. I'll expand on these ideas more going forward.